Rate of output growth in manufacturing slows down

Manufacturing industry is still recording strong growth in output, but the rate of growth has slowed for the second month running, according to the latest purchasing index.

However, input price inflation recorded the fastest rise in the index's 22-month history. Rising prices were most commonly linked, by the 250 companies in the NCB Purchasing Managers' Index (PMI), to the weakness of the euro, higher oil prices, and a general firming of commodity prices, as global demand strengthened further. The continued acceleration in input prices was described as a "disquieting feature" of the index by Mr Dermot O'Brien, chief economist at NCB Stockbrokers.

Output in February rose significantly, with more than one in five firms reporting increased production and just 6 per cent recording a downturn. However, the overall measure showed a further slowdown in the growth of output from the peak recorded in December, as firms reported the ongoing reduction of Y2K safety stocks. The PMI fell from 56.7 in January to 55.1 in February. Readings above 50.0 signal growth, while anything below that indicates contraction. The more telling seasonally adjusted output index registered 57.5, down from 59.9 in January and well below the 62.3 level in December. Stocks of finished goods fell for the second consecutive month as a result, NCB said, although the decline was less marked than in January.

Order books continued to register buoyant growth, but the rate of increase eased for the second month running. NCB said that "once again, slower growth largely reflected a return to more normal levels of ordering, following the build-up of stocks by customers at the end of last year to protect against possible millennium bug problems".

Shortages of supply were again reflected in a further lengthening of suppliers' delivery times, although the number of delays continued to fall from the peak seen in October, NCB said. In common with other industries, employment in manufacturing continued to rise. However, the rate of increase slowed for the second consecutive month.